ISRAELI CABINET AFFIRMS POLICIES ON ARAB PROTEST

As demonstrations continued in the West Bank today, the Government affirmed its policies in the occupied territories, declaring that ''no acts of violence or disturbances of the peace or order will be tolerated.''

In northern Israel, leaders of Israeli Arabs prepared for a general strike and demonstration on Tuesday to demand an end to the Israeli occupation in the West Bank and Gaza and the formation of a Palestinian state. (Page A5.)

Three Palestinian protesters were shot and wounded by Israeli soldiers in Yabed, near the West Bank town of Jenin. An army spokesman said they had attacked a patrol with knives and Molotov cocktails. According to an army statement two of the Palestinians were hospitalized. No soldiers were injured.

3 Mayors Dismissed

A Cabinet statement said Arab residents ''who observe the law and keep the peace will be guaranteed their safety and accorded all possible help.'' It said the policy on the West Bank and Gaza Strip ''will continue without demur.''

Israeli officials, including Defense Minister Ariel Sharon and the West Bank administrator, Menachem Milson, have said during the last week of demonstrations that Israel was in a crucial struggle against the Palestine Liberation Organization on the West Bank. Three pro-P.L.O. mayors, elected in 1976, have been dismissed. Call for a Palestinian State

Eight other mayors, including two relative moderates - Elias Freij of Bethlehem and Rashad al-Shawwa of Gaza - issued a a strong statement as well, branding Israeli policies as ''a step toward annexing the occupied lands,'' advocating an independent Palestinian state and resolving to have no dealings with Mr. Milson or his civilian administration.

''We affirm our right to self-determination,'' the mayors said, ''to set up an independent Palestinian state under the leadership of the P.L.O., our sole legitimate representative.''

They added, ''We reject the civil administration and refuse under any circumstances to deal with any of these departments and bodies.'' They regard the civil administration as an effort to absorb the territories gradually into Israel proper.

It was this refusal to deal with Mr. Milson that was cited by the Defense Ministry as the reason for the dismissal on March 18 of Mayor Ibrahim Tawil of El Bireh and his town council. The ministry's action set off the most widespread disorders since the West Bank was captured by Israel from Jordan in the 1967 Middle East war. Six Arabs and one Israeli soldier have been killed in both the West Bank and Gaza and at least 20 Arabs have been wounded by gunfire. Three Israeli soldiers were wounded in a grenade attack last week.

The case of one of the dead Arabs, Mohammed Abdullah Youssef Suhweil, 18 years old, took a turn today when a Jewish settler, Natan Nathanson, who had been held for a week as a suspect, was released on bail. The Army radio reported that the bullet, fired into the boy's forehead, was a nine-millimeter slug, whereas Mr. Nathanson's gun was an M-16, which fires a different caliber bullet. Detention of Youth at Issue

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The police had been proceeding on the assumption that the youth had been killed during a clash with settlers on March 15, when stones were thrown at a settler's car and another youth was wounded by gunfire in the arm.

But the dead youth's mother, Miriam Youssef Khalil Suhweil, said in an interview before she knew he was dead that the police in Ramallah had checked and learned that he was in the army's custody at the Ramallah military headquarters. Two prisoners, released from there, gave her a message from her son asking that he be sent a sweater, she said. Relatives visiting prisoners inside said he was known to be there.

There were only scattered demonstrations and relatively minor incidents today. Stones were thrown at Israeli vehicles and Palestinian flags were hoisted in Nablus, Ramallah and Beit Sahur. In Beit Sahur, near Bethlehem, youths gathered after church services, waved a Palestinian flag and threw stones at army vehicles, according to Palestinian sources. Army Denies Report of Arrests

Soldiers hit the demonstrators with riot sticks, the Palestinians said, and arrested 35 people, detaining them first in the churchyard, where soldiers tried to make them spit on the Palestinian flag. An army spokesman denied that there were any arrests and said that nobody was detained or told to spit on a Palestinian flag.

Palestinians said that at the Ein Beit Alma refugee camp near Nablus, north of Jerusalem, all men aged 16 to 70 were detained outside all Saturday night. The army had no immediate information on this.

Three members of the city council of Nablus were reported arrested. They were identified as Khaldul Abedel Hak, Abdel Ranim and Abdel Basit Khayat. No immediate confirmation was available from the Israeli authorities. The mayor of Nablus, Bassam al-Shaka, was one of those dismissed last week, and since then, the Israeli authorities have been trying to get the town council and municipal employees to resume their normal duties. So far, they are said to have refused.

As the Government has come under rising attack for what critics call its heavy hand in the territories - several thousand activists with the Peace Now movement demonstrated Saturday night in Tel Aviv, and the opposition Labor Party has condemned Government actions - Prime Minister Menachem Begin has lashed out at his critics.

His Cabinet Secretary, Aryeh Naor, told reporters after today's meeting that Mr. Begin had attacked Labor Party leaders for endorsing the Peace Now demonstration, at which the annexation of the Golan Heights was also criticized.

''The Golan is an inseparable part of the state of Israel, by a law passed by an overwhelming majority'' of the Israeli Parliament, Mr. Begin was quoted as saying.

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A version of this article appears in print on March 29, 1982, on Page A00001 of the National edition with the headline: ISRAELI CABINET AFFIRMS POLICIES ON ARAB PROTEST. Order Reprints|Today's Paper|Subscribe